Agoric computing

Smart contracts are computer protocols intended to facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts were first proposed by Nick Szabo in 1996.

Proponents of smart contracts claim that many kinds of contractual clauses may be made partially or fully self-executing, self-enforcing, or both. The aim with smart contracts is to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting.

Smart contracts have been used primarily in association with . The most prominent smart contract implementation is the Ethereum blockchain platform. The real-world smart contract that gained mainstream coverage was The DAO, a decentralized autonomous organization for venture capital funding, running on Ethereum, which was launched with US$250 million in crowdfunding in May 2016 and was hacked and drained of 3,689,577 ETH three weeks later.

The phrase "smart contracts" was coined by Nick Szabo in 1996, and reworked over several years. Szabo's first publication, "Smart Contracts: Building Blocks for Digital Free Markets" was published in Extropy #16, and then later reworked as "Formalizing and Securing Relationships on Public Networks." These documents described how it would be possible to establish contract law and related business practices through the design of electronic commerce protocols, between strangers on the Internet. Szabo describes smart contracts as:

New institutions, and new ways to formalize the relationships that make up these institutions, are now made possible by the digital revolution. I call these new contracts "smart", because they are far more functional than their inanimate paper-based ancestors. No use of artificial intelligence is implied. A smart contract is a set of promises, specified in digital form, including protocols within which the parties perform on these promises.

Szabo, inspired by researchers like David Chaum, also had a broader expectation that specification through clear logic, and verification or enforcement through and other digital security mechanisms, might constitute a sharp improvement over traditional contract law, even for some traditional kinds of contractual clauses (such as automobile security interests that provide for repossession) that could be brought under the dominion of computer protocols.

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